After the Federal Reserve described a disappointing interest rate outlook on Wednesday local time, the stock market plummeted and volatility surged. However, market Analysts indicated that this provides a buying opportunity for investors and could trigger a strong year-end rally in the stock market.

Nicholas Colas, co-founder of DataTrek Research, stated in a client report on Thursday, "The sudden surge of the fear index strongly indicates that Wednesday's sell-off is a recent buying opportunity. Unless there are some other strong negative catalysts, we believe that the U.S. stock market will be higher than Wednesday's closing price in a month."

According to FactSet data, the Cboe Global Markets Volatility Index (VIX) surged 74% on Wednesday, marking the largest single-day increase since 2018, closing at 27.62. Generally, a VIX above 20 indicates a higher volatility in the stock market.

However, Colas mentioned that the stock market's "buy" signal was triggered after the VIX recorded its 14th highest closing price since the current bull market began in October 2022.

"In the past 565 trading days, the VIX has only closed above 27 on 16 occasions, or just 2.8% of the time. Of these, 12 occurred in October 2022, one month later the S&P 500 Index rose 4.6%; and three occurred in early August, when the rapid appreciation of the yen triggered turmoil in the global markets. One month later, the S&P 500 Index increased by 5.2%," Colas wrote.

Tom Lee, known as "Wall Street's oracle," also believes that investors do not need to worry.

"For us, this panic reaction will be short-lived," wrote the research director of Fundstrat Global Advisors. "Wednesday was a painful day, but the fundamentals haven’t changed. That’s why we see this as a moment for 'picking up the fallen'."

Lee emphasized several reasons why the stock market is only temporarily sluggish.

He noted that the VIX recorded the second-largest single-day increase on record, and stated that historically, when the VIX Index has had similar surges in the past, the stock market has fully rebounded within a month.

In addition, Lee added that the S&P 500 Index is also testing its 50-day moving average, which is the position where the index has rebounded multiple times this year after receiving support.

He also pointed out that although the Federal Reserve made hawkish comments and the policy "visibility" for the new year has weakened, investors currently still believe that the Federal Reserve will ultimately be dovish.

"In other words, the Federal Reserve still supports the market," Lee wrote. "We interpret the Federal Reserve's latest wording more as wanting to 'slow down.'"

In the long term, Lee believes that CNI Mid-Small Cap.Index stocks are most likely to be the beneficiaries. Specifically, he highlighted that regional banks BancFirst, the music streaming platform Spotify, the online used car market Carvana, and the hamburger chain Shake Shack are attractive Stocks.